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Merrill Lynch is expected this afternoon to announce that it has hired New York Stock Exchange CEO John Thain to replace ousted CEO Stan O’Neal, according to people familiar with the matter.

An NYSE board meeting is scheduled for 2 p.m. today and an announcement could come after the market closes, sources said. The move is a huge coup for Merrill and board member Alberto Cribiore, who has led the search for a new CEO after O’Neal resigned on Oct. 30.

Many outsiders believed BlackRock chief Laurence Fink was close to taking the job and Thain would take the reins of the much larger Citigroup. While Thain was contacted for both jobs, the former Goldman Sachs president is said to prefer a smaller more focused organization like Merrill rather than a huge financial supermarket like Citi.

Since taking over the NYSE, Thain has successfully transformed the exchange from a non-profit membership organization into a global public company. He is known as a very accomplished dealmaker who pulled off a difficult battle against Deutsche Bourse to gain control of pan-European stock exchange Euronext last year.

Merrill’s 62,000 employees, already rocked by the firm’s recent announcement of record losses, have anxiously awaited news from the firm since O’Neal’s departure.

Spokespeople for Merrill and the NYSE declined to comment.

O’Neal lost the board’s confidence after reporting a third-quarter loss of $2.24 billion, or about six times more than he acknowledged on Oct. 5. The shocking losses came from $8.4 billion of writedowns for the subprime mortgages, asset-backed bonds and loans gone bad under his watch.

Merrill’s result was the biggest quarterly debacle in the history of the securities industry. The shares have lost one third of their value in five months as rising U.S. subprime mortgage defaults led to a credit-market freeze in August.